If one day your neighbor should decide to stop paying his mortgage it’s not your problem and he should get a summons a few months later—and be out on his ear a few months after that; and you should see a shiny-faced family move in shortly thereafter.
In case you’ve been living under a rock, that’s not what’s been happening. People have been losing their jobs and discovering that their homes are worth far less than they owe on them. In many cases they were lured into homes they could not afford, bamboozled into paying far more interest than they should have had to pay, and stuck in adjustable-rate mortgage products to boot. It doesn’t matter whether you have any sympathy for them or not—everyone whose home goes empty in your neighborhood lowers your property values far more than would happen if some solution had been found to keep them in their home.
On the banker side, as the years have gone by we are discovering breathtaking malfeasance and even systemic fraud.
You may not have seen in the mainstream press that recently at oral argument in the Washington Supreme Court an attorney for Mortgage Electronic Registration Systems (MERS), the big banks’ document tracking service (and oh-so-coincidental means of dodging billions in documentary stamp taxes nationwide), had to admit that he had no idea who actually owned the mortgage note in question.
It was MERS job to keep track of that, and by the time the case got to appeal they had already had years to try to figure it out—the whole setup was so mangled that it is simply impossible to identify the party who should actually be negotiating with that homeowner as courts are now requiring. In the case of originator Taylor, Bean and Whitaker, mortgages were fraudulently pledged to two or three different investors. Oh, and those taxes are coming due: Oakland County, Michigan just won a summary judgment against Fannie Mae and Freddie Mac for unpaid excise taxes on deeds.
The $25-billion-dollar mortgage settlement that has recently been touted as a resolution of states’ claims against the big banks in no way settles all matters, is largely not out-of-pocket for the banks, and where it does produce cash, that money mostly goes to cash-strapped California which is under no obligation to spend it to help homeowners and coincidentally is in no financial position to do so. Once again we’re looking at more window dressing out of Washington.
Wall Street now wants to rent out the nation's already-foreclosed homes and Bank of America wants homeowners to hand them over without foreclosure and rent them back from the bank.
In the Great Depression, Franklin Delano Roosevelt’s Home Owners’ Loan Corporation provided real relief to Americans, saving 80 percent of the homeowners who entered the program. By contrast, HAMP and other wimpy programs out of the current administration have had closer to a 2 percent success rate. Our regulators and legislators have been captured by the banks and Wall Street, and they are loath to do anything to relieve Americans.
All of this is why I have no compunction about fighting banks in court on behalf of homeowners. I charge people $500, and I’ll admit that in most cases that even putting in the necessary defenses and fighting to make sure that the bank has correctly documented everything they’re doing merely delays the inevitable. In a couple of my cases banks’ “foreclosure mill” attorneys have let a case languish for more than a year and I have been able to get it dismissed for failure to prosecute, and in another case my clients were never served with the original complaint in the foreclosure case that was filed (which has gone on for two years) and when the amended complaint they filed at the end of November has gone unserved for 120 days I will be able to move to get a dismissal for failure to serve process.
I would stop doing all this tomorrow if Congress chose to do something logical like restoring the ability of homeowners to cram down the balances of their mortgages to the value of their homes in Chapter 13 Bankruptcy (the Supreme Court ruled in 1993’s Nobelman decision that homeowners could not longer do that, even though those who own vacation homes can!). In Iceland they simply passed a law that crammed everyone’s mortgage down to 110% of the values of their homes. That could work, too.
But so long as Americans’ attitudes remain “I’ve got mine," the banks will pick us off one at a time, and finally those who find themselves still standing at the end will be taxed to make up the banks’ losses. At this juncture, knowing what we now know, to support the big banks is nothing but Stockholm Syndrome on a societal scale.